Applied Materials, Inc.
) is set to report second quarter 2013 results on May 16. Last
quarter, it posted a 100% positive surprise. Let's see how things
are shaping up for this announcement.
Growth Factors This Past Quarter
Though Applied's first-quarter revenues were down
sequentially, the results were at the high end of the management
guidance, owing to better-than-expected performance at the SSG
segment. Strength at foundries drove the outperformance in the
last quarter. We believe that
) Ultrabook partners and
) Windows 8 adopters may also boost demand through 2013.
Despite lower volumes in the last quarter, margins were up
sequentially due to a favorable mix.
Though there is potential in the solar energy market, the
company's solar division has taken longer than expected to reach
profitability. The company posted weak results in the last
quarter due to overcapacity and weaker-than-expected demand.
Our proven model does not conclusively show that Applied will
beat earnings estimates this quarter. That is because a stock
needs to have both a positive Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
)and a Zacks Rank #1, #2 or #3 for this to happen. That is not
the case here as you will see below.
The Most Accurate estimate stands at $0.11 while the Zacks
Consensus Estimate is higher at $0.13. That is a difference of
Zacks Rank #3 (Hold):
Applied's Zacks Rank #3 (Hold) lowers the predictive power of ESP
because the Zacks Rank #3 when combined with a negative ESP makes
surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5
(Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions
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